Financial Crisis

[flying]

Cramers act, with Zerohedges content, and Krusty the clowns voice. Is there a non-drowsy version? Thats entertainment.

Depends how tired are you?

Actually the 2nd half was not very interesting & pretty old news about pawn like businesses.

But one thing it did point out that does bother me in many sectors is the same old story...The one where regulations are put in place...But then $$ is spent or campaign promises that need to be repaid works its magic through lobbyist & suddenly an exemption is permitted to this regulation.

That is the one that always gets me.

Edited June 25, 2010 by flying

[12DrinkMore]

Onwards into the bright new future awaiting us.

http://www.bloomberg.com/news/2010-06-25/states-of-crisis-widen-as-46-governments-in-u-s-face-greek-style-deficits.html

“It’s unbelievable,” says Bob Nichols, CEO of Windward Capital Management Co. in Los Angeles. “How do you screw up a place with the growth capability of California? It’s so dysfunctional.”

Well, yep, how did they all screw up?

Bright new future, full of prosperity, earlier retirement, well, I guess a few made it.

But it looks like the rest of the west is heading for a big disappointment, as, indeed, a few EUR-fartball teams are making an unexpected early exit form the World Fartball Championships.

[jcon]

Some personal <deleted>' responsibility, perhaps??? Yeah I know it's an ancient concept, hardly adopted in today's "point-the-finger" of blame culture...

And there lies the problem. The average assembly line GM worker who doesnt have the same

insight into the financial markets as you do isn't wrong to rely on the assurances of the Chairman

of the US Federal Reserve being grilled by Congress on CNN telling everyone

that housing prices have never gone down before That is not pointing the finger jcon

- that is merely trusting a very senior public servant ? What was wrong with trust - there was a lot of

it around 30-40 years ago.

So the only answer to " Some personal <deleted>' responsibility " is dont trust anyone anymore - no one

and that is why we have a Financial Crisis

Jcon, this has been discussed here many times and it surely was not only the people that were allowed to borrow too much that caused this alleged crisis.

Pointing the finger to the "dreamers" that believed all the crap told to them by "professional" advisors is in my opinion wrong.

We know the fiat system of money and it's creation is wrong and flawed, this system only works by creating more and more debt.

Therefore this crisis has to be solved through the system "exploding" eventually.

Actually 'moral hazard' is a very key cornerstone of the game. As to a degree, is the fact that the referee either must be 'corrupt' or 'incompetent' (rather surprisingly being both is a disadvantage) as a consequence of the game itself being both morally bankrupt and defined by internal contradictions. Unfortunately, noone has thought of a better game since throwing spears at mammoths died out. Not taking part is an option as is not being allowed to take part and presumably there are plenty of people on the subs bench.

P.S. No good playing the 'back in the good old days' card because it is simply 'same game' 'different players' although perhaps with less involvement from the 'ref'.

Midas I still don't agree with your GM assembly line worker analogy as it pertains to the issue of trust. It just doesn't fly with me. Everybody has some level of personal responsibility - it is at that point at which members of society stray from taking too many personal responsibilities to and shift those to ''trusted _____" that we will see a decay in said society.

Undoubtedly, you will bring up the subject of ''trust'' to counter such an idea (like you did with the 30-40 years ago point). Well that's a slippery slope and people just need to know where to draw the line. Your concept of "trust," when viewed through a different lens, can be construed as "blind faith." And that, my friend, will be/is the catalyst for the downfall of society - financial or otherwise.

That's where moral hazard plays it's role. If it can damage societies (through religion, say), than you can be dam_n sure it can ruin financial markets. Now forgive me if I've made what seems to be a radical association between agnosticism and financial markets - but to me, personal responsibility (and some minimum level of intelligence) plays a role in both. I cannot confirm nor can I deny, but I do not have blind faith - financial markets included. So when some ''trusted public servant'' flaps their mouth, I'll take it with a grain of salt and draw my own conclusions, just as I would with anything else in life.

Alex, you write:

"Pointing the finger to the "dreamers" that believed all the crap told to them by "professional" advisors is in my opinion wrong."

I see your point. I would, however, hold both the "dreamers" and the "professionals" accountable. My point is that neither naivete nor ignorance is an excuse (for anything). They (naivete and ignorance) may be excusable reasons for outcomes in the short term - but repeated naivete and ignorance over time is just plain idiotic. Education is the key, and a thread like this can provide some good insights to those unfamiliar. For those who refuse to learn, that's another story.

Surely midas you can bring in the circular argument along the lines of "but there are millions of people who don't have access to the education you speak of, jcon." In the grand sense, maybe you're right. Logically, and very simply, however, this doesn't really apply to people who just can't afford something and refuse to understand that simple concept. My friend and former trader would say, "It ain't rocket surgery." And we can go back and forth about this forever - but in the grand scheme of things, the GM assembly line workers have one <deleted> hel_l of a good life compared to their counterparts in other parts of the world. To bitch and moan about their lives is a twisted US-centric disservice to humanity, period.

Happy Midsummer

[12DrinkMore]

Hillary Clinton has told China that the US considers human rights concerns secondary to economic survival.

http://www.telegraph.co.uk/news/worldnews/asia/china/4735087/Hillary-Clinton-Chinese-human-rights-secondary-to-economic-survival.html

[12DrinkMore]

http://www.bloomberg.com/news/2010-06-24/ten-signs-there-s-no-adult-in-this-economic-room-william-pesek.html

Many leaders just want to get out of office before the next financial blowup so they can try to escape blame.

Long-term thinking is badly needed. What we need is an adult or two in the room to make sure leaders tackle the big challenges of our day. Good luck finding any out there.

Difficult to argue that.

Just kick the can down the road a bit further, take the money and get out.

And the problem is that if they don't do that, then they get kicked out by the "give me my benefits" electorate.

[midas]

Midas I still don't agree with your GM assembly line worker analogy as it pertains to the issue of trust. It just doesn't fly with me. Everybody has some level of personal responsibility - it is at that point at which members of society stray from taking too many personal responsibilities to and shift those to ''trusted _____" that we will see a decay in said society.

Undoubtedly, you will bring up the subject of ''trust'' to counter such an idea (like you did with the 30-40 years ago point). Well that's a slippery slope and people just need to know where to draw the line. Your concept of "trust," when viewed through a different lens, can be construed as "blind faith." And that, my friend, will be/is the catalyst for the downfall of society - financial or otherwise.

That's where moral hazard plays it's role. If it can damage societies (through religion, say), than you can be dam_n sure it can ruin financial markets. Now forgive me if I've made what seems to be a radical association between agnosticism and financial markets - but to me, personal responsibility (and some minimum level of intelligence) plays a role in both. I cannot confirm nor can I deny, but I do not have blind faith - financial markets included. So when some ''trusted public servant'' flaps their mouth, I'll take it with a grain of salt and draw my own conclusions, just as I would with anything else in life.

If the real untainted information was there freely available for the average Joe to research and it was just a matter of are you too lazy to look for that information , then i would agree with you

But when even other members of Congress cant even get at the real truth then what hope does the average person have ?

You have got a totally corrupt institution i.e. the US Federal Reserve that did everything in its power to fight off an in- depth investigation as to all it true activities so please tell me how the GM assembly line worker or anyone else for that matter can take personal responsibility and establish what they should have done ? Where should they have gone for their information to have known if buying a house at that time was a prudent thing to do or not so prudent ? So then it comes back to what i said – you cant trust anyone.

Of course now the cat is out of the bag and we know the Fed is corrupt to the core so yes maybe the answer is insurection and civil disorder. Maybe they will start with a tax strike as Gerald Celente predicts

[Abrak]

Here is a good interview with Joe Stiglitz. It isnt as UK centric as the headline suggests.

http://www.independent.co.uk/news/uk/politics/osbornes-first-budget-its-wrong-wrong-wrong-2011501.html

I particularly like this observation about one of the underlying structural problems relating to the financial crisis.

Banks were demanding up to 40 per cent of the corporate profits, saying their innovative financing was adding value. But "all this talk about innovation was a sham" because it did not relate to any real increase in the economy's productivity.

And just in case you think it might be a little dry....

The best scenario is long and hard ... and the worst is much worse. If any one of these countries is forced into default, the banking system is so highly leveraged that it could cause real problems. This is really risky, really scary.

[midas]

Here is a good interview with Joe Stiglitz. It isnt as UK centric as the headline suggests.

http://www.independent.co.uk/news/uk/politics/osbornes-first-budget-its-wrong-wrong-wrong-2011501.html

I particularly like this observation about one of the underlying structural problems relating to the financial crisis.

Banks were demanding up to 40 per cent of the corporate profits, saying their innovative financing was adding value. But "all this talk about innovation was a sham" because it did not relate to any real increase in the economy's productivity.

And just in case you think it might be a little dry....

The best scenario is long and hard ... and the worst is much worse. If any one of these countries is forced into default, the banking system is so highly leveraged that it could cause real problems. This is really risky, really scary.

Yes indeed

" So what should we be doing? "The lesson is not that you cut back spending, but that you redirect it. You cut out the war in Afghanistan. You cut a couple of hundred billion dollars of wasteful military expenditure. You cut out oil subsidies. There's a long list of things we can cut."

And they could cut out the disgustingly wasteful spending at the G20 which these

days of austerity could and should be done by secure video conference link ?

" Except, perhaps, as a headache for Canadian Prime Minister Stephen Harper, who has been criticized for the cost of the G-8 and G-20 summits.

The fake lake is a few inches deep and about 10 meters across at its widest. It cost $55,000 and is part of a nearly $2 million mini theme park that will be torn down when the summits end."

http://www.sacbee.com/2010/06/25/2849619_world-summit-notebook-fakelakegate.html

[Gambles]

Interesting thesis on fiat and trade describing some more subtle forms of warfare-

Global Financial Crisis for Dummies: Why the Abandonment of the Gold Standard is Responsible for the World's Sovereign Debt Crises | zero hedge

This is so overly simplistic as to be either very naieve or crude propaganda. Either way, it's not worth taking very seriously

[Abrak]

Interesting thesis on fiat and trade describing some more subtle forms of warfare-

Global Financial Crisis for Dummies: Why the Abandonment of the Gold Standard is Responsible for the World's Sovereign Debt Crises | zero hedge

This is so overly simplistic as to be either very naieve or crude propaganda. Either way, it's not worth taking very seriously

Or possibly it was meant as a sarcastic joke?! In which case, while not being worth taking seriously, it is quite funny.

[Gambles]

yes I am Canadian

Israel is the only country in the middle east that could be destroyed by one crude nuclear bomb.

Look at the language coming out o the president of Iran(who also happens to be a holocaust denier) The Isrealies are simply concerned about their survival, everything you mentioned about ability and holdings is just politics. The middle east is so complicated with Sunni muslim VS Shiite conflict that the only thing keeping them at peace is their hate-on for Israel so anyone backing Iran is unlikely.

Israel just wants to bomb Iranian nuclear sites and go home, Iran is the one that will start the war. Israel bombed a nuclear site in Iraq in 1981 and bombed a nuclear site in Syria in 2007. There was minimal repercussions.

i can only think you are saying these things because you are a gold bug and maybe you could see

your precious metal sky rocketing as a result of World War 3 ?

But be careful what you wish for because the world is very different now from 1981 and even 2007.

Do you think a nuclear armed Pakistan ( a 90% failed state ) plus Syria, Lebannon,Turkey etc

will stand by and allow an unprovoked attack ?

Oil would be the big bet when Isreal attacks Irans nuclear sites. Being a gold bug, I wish that situation was resolved so that the world could peacefully go bankrupt.

Not many of the countries you mentioned support a nuclear armed Iran.

how many support a nuclear Israel

The Middle East is a powderkeg

You're very one-eyed on this, Sokal

[jcon]

If the real untainted information was there freely available for the average Joe to research and it was just a matter of are you too lazy to look for that information , then i would agree with you

But when even other members of Congress cant even get at the real truth then what hope does the average person have ?

You have got a totally corrupt institution i.e. the US Federal Reserve that did everything in its power to fight off an in- depth investigation as to all it true activities so please tell me how the GM assembly line worker or anyone else for that matter can take personal responsibility and establish what they should have done ? Where should they have gone for their information to have known if buying a house at that time was a prudent thing to do or not so prudent ? So then it comes back to what i said – you cant trust anyone.

Of course now the cat is out of the bag and we know the Fed is corrupt to the core so yes maybe the answer is insurection and civil disorder. Maybe they will start with a tax strike as Gerald Celente predicts

Like I said Midas, we can go back and forth about this one forever, but it's not really productive.

I would say that it's not that "you can't trust anyone" but rather "you shouldn't trust everybody." It may be perhaps a sad reality in "today's world" as opposed to the "good old days" that you keep referring to when a handshake "meant something." I think in reality you're romanticizing the old times a bit midas, there was and always will be plenty of back-stabbing going around.... we have thousands of years of (un)civilization to prove that. "Handshakes in the 80s" is a bit naive when you look at a longer time frame, don't you think? It's the same stuff, over and over, repeated throughout history - the actors change, and perhaps the speed of everything has changed, but there is a reason for the saying "the more things change, the more they stay the same." I think a wider perspective would help here.

I'm all for a tax strike. But we'd probably all be charged with sedition or the "T" word and then we'd be fcked. Am I happy about that? No. But you can't bitch and moan about things forever - adapt and survive.... don't adapt and lose. Period. That's the way the world works, and it has been this way for millenia. And I suspect it will be this way for millenia to come, regardless of how many skies will have fallen along the way.

[lannarebirth]

If the real untainted information was there freely available for the average Joe to research and it was just a matter of are you too lazy to look for that information , then i would agree with you

But when even other members of Congress cant even get at the real truth then what hope does the average person have ?

You have got a totally corrupt institution i.e. the US Federal Reserve that did everything in its power to fight off an in- depth investigation as to all it true activities so please tell me how the GM assembly line worker or anyone else for that matter can take personal responsibility and establish what they should have done ? Where should they have gone for their information to have known if buying a house at that time was a prudent thing to do or not so prudent ? So then it comes back to what i said – you cant trust anyone.

Of course now the cat is out of the bag and we know the Fed is corrupt to the core so yes maybe the answer is insurection and civil disorder. Maybe they will start with a tax strike as Gerald Celente predicts

Like I said Midas, we can go back and forth about this one forever, but it's not really productive.

I would say that it's not that "you can't trust anyone" but rather "you shouldn't trust everybody." It may be perhaps a sad reality in "today's world" as opposed to the "good old days" that you keep referring to when a handshake "meant something." I think in reality you're romanticizing the old times a bit midas, there was and always will be plenty of back-stabbing going around.... we have thousands of years of (un)civilization to prove that. "Handshakes in the 80s" is a bit naive when you look at a longer time frame, don't you think? It's the same stuff, over and over, repeated throughout history - the actors change, and perhaps the speed of everything has changed, but there is a reason for the saying "the more things change, the more they stay the same." I think a wider perspective would help here.

I'm all for a tax strike. But we'd probably all be charged with sedition or the "T" word and then we'd be fcked. Am I happy about that? No. But you can't bitch and moan about things forever - adapt and survive.... don't adapt and lose. Period. That's the way the world works, and it has been this way for millenia. And I suspect it will be this way for millenia to come, regardless of how many skies will have fallen along the way.

I was going to give you the thumbs up emoticon signifying that I generally agreed with you but am too lazy or too stupid to tell you why. Sadly it is missing from TV's new software. Color me lazy and stupid.

Here's the truth ofthe matter though. All of us have a choice. We can "opt in" to the system with all the deceit and profits/lossses that may bring, or we can opt out. I''ve got a foot in both camps and know I'm probably going to lose on one of my bets.

[Abrak]

Am I happy about that? No. But you can't bitch and moan about things forever - adapt and survive.... don't adapt and lose. Period. That's the way the world works, and it has been this way for millenia. And I suspect it will be this way for millenia to come, regardless of how many skies will have fallen along the way.

Actually I think comparing 'capitalism' to 'evolution' is far more valid than your previous comparison with 'belief'. You see, I dont think in peoples minds there is a 'belief' in markets, best results, efficiency, equilibrium. 'Belief' in sense of 'overcoming' rationality, common sense and intelligence - it is faith without proof or evidence.

The quaint idea that the resolution to inherent contradictions, is all down to a matter of 'trust', 'competency', 'intelligence' and 'honesty' is an absolute nonsense because if you had all those things - which, of course you dont - it still wouldnt work.

'Capitalism' and 'evolution' are very similar because it equates to everyone pursuing 'individual' goals that when 'aggregated' results not in 'progress', a 'better state' or anything of any significance apart from in the 'long run', perhaps, 'extinction'.

[midas]

I think in reality you're romanticizing the old times a bit midas, there was and always will be plenty of back-stabbing going around.... we have thousands of years of (un)civilization to prove that.

That's the way the world works, and it has been this way for millenia. And I suspect it will be this way for millenia to come, regardless of how many skies will have fallen along the way.

Oh yes I admit I do that but not because of the reasons you describe.

The world feels so different now - a distinctly rancorous atmosphere compared to the

1960's. You can sense and feel the less tolerant side of people now I never saw earlier in my life.

But then in 1960 there were only three billion people on this fragile planet

- now we have nearly 7 billion and to be 10 billion in 2061.

The way the 7 billion are behaving I would bet you anything the world

will not survive " for millenia to come " unless there is a profound change

of attitude and your response gives little hope of that. And also I wont be around to collect

my winnings

[jcon]

I would agree, Abrak.

Incidentally, my point about beliefs was actually more similar to your point about evolution than I may have made it sound. Economics, as a social science, really only works as it is applied within the framework of any particular society. So to expect certain outcomes without understanding of a true science like biology (and consequently, evolutionary theory) would be, at the very least, misguided... now that's some strong wording for some, I suppose, but my intent is not to criticize. It was just to point out that ''blind faith'' works just about as well in financial markets as it does in society (it doesn't - at least that's my contention). In fact, I think it really only confounds the matter and causes more problems than it does provide solutions.

So we can't really assume any ''rational actors'' (as normally defined by economics) within/across societies because the differences among the societies alter the framework of economic theory. Until one can grasp certain realities, I don't think there can be any progress. For the conspiracy theorists among us, the only real conspiracy is the ''original'' one... everything else is a by-product... Now that is beyond the scope of this discussion, and I suppose I must add that it is just my opinion based on my knowledge of the world around me. Everybody's mileage may vary....

I suppose your last line in your post could be analogous to some ideas in chaos theory - that would be a cool discussion, though I don't think I'm knowledgeable enough in that field to participate fully. It may, however, be a nice distraction from talking about the Baht rate ("bath rate," for some) or ATM fees. I do realize, though, that there needs to be a lowest common denominator amongst participants in any discussion (especially in a forum), and that fact is usually why we end up talking about such seemingly ''mundane'' topics....

[jcon]

I think in reality you're romanticizing the old times a bit midas, there was and always will be plenty of back-stabbing going around.... we have thousands of years of (un)civilization to prove that.

That's the way the world works, and it has been this way for millenia. And I suspect it will be this way for millenia to come, regardless of how many skies will have fallen along the way.

Oh yes I admit I do that but not because of the reasons you describe.

The world feels so different now - a distinctly rancorous atmosphere compared to the

1960's. You can sense and feel the less tolerant side of people now I never saw earlier in my life.

But then in 1960 there were only three billion people on this fragile planet

- now we have nearly 7 billion and to be 10 billion in 2061.

The way the 7 billion are behaving I would bet you anything the world

will not survive " for millenia to come " unless there is a profound change

of attitude and your response gives little hope of that. And also I wont be around to collect

my winnings

I agree midas - perhaps more than you think.

High populations and intolerance will create crises larger than any one particular financial crisis. Nature does not reward stupidity (and I mean that not in a 2012 kind of way, but in the long run). It may seem the case in the short run, but nature is unstoppable in the long run... My point to you is that perhaps one should just take some time to chill out in the meantime (please don't respond with "but some people don't have the opportunity to chill out, jcon" - I know that).

[My Friend Same]

yes I am Canadian

Israel is the only country in the middle east that could be destroyed by one crude nuclear bomb.

Look at the language coming out o the president of Iran(who also happens to be a holocaust denier) The Isrealies are simply concerned about their survival, everything you mentioned about ability and holdings is just politics. The middle east is so complicated with Sunni muslim VS Shiite conflict that the only thing keeping them at peace is their hate-on for Israel so anyone backing Iran is unlikely.

Israel just wants to bomb Iranian nuclear sites and go home, Iran is the one that will start the war. Israel bombed a nuclear site in Iraq in 1981 and bombed a nuclear site in Syria in 2007. There was minimal repercussions.

i can only think you are saying these things because you are a gold bug and maybe you could see

your precious metal sky rocketing as a result of World War 3 ?

But be careful what you wish for because the world is very different now from 1981 and even 2007.

Do you think a nuclear armed Pakistan ( a 90% failed state ) plus Syria, Lebannon,Turkey etc

will stand by and allow an unprovoked attack ?

Oil would be the big bet when Isreal attacks Irans nuclear sites. Being a gold bug, I wish that situation was resolved so that the world could peacefully go bankrupt.

Not many of the countries you mentioned support a nuclear armed Iran.

how many support a nuclear Israel

The Middle East is a powderkeg

You're very one-eyed on this, Sokal

was that a nuclear israel or nuke israel. I got confused there; please clarify

[AlexLah]

Here a short clip that explains what happened.

It were the "Insurances" that blew up.

[lannarebirth]

Here a short clip that explains what happened.

It were the "Insurances" that blew up.

Didn't get a chance to see the video Alex, but I'm pleased to see that you're getting closer to your answer. As you've probably guessed by now, there's no such thing as "insurance'. The idea that there might be is what led to the '87 crash. Individual players can hedge risk but everybody cannot hedge their portfiolio. That's what crashes are made of. Do your homework.

[AlexLah]

That's why they called it (These insurances on the bets) CDS LB, to avoid state control, they found a loophole and benefited from it.

Just ask yourself if I can buy some kind of insurance to protect me against the losses I make when playing in a casino.

I cannot, but hey those big money speculators can and when they loose it is all (sort of) covered it seems.

Why is there no option for people that buy a house to insure them that the mortgage gets payed in case they do not have the means/money to pay it?

[lannarebirth]

That's why they called it (These insurances on the bets) CDS LB, to avoid state control, they found a loophole and benefited from it.

Just ask yourself if I can buy some kind of insurance to protect me against the losses I make when playing in a casino.

I cannot, but hey those big money speculators can and when they loose it is all (sort of) covered it seems.

Why is there no option for people that buy a house to insure them that the mortgage gets payed in case they do not have the means/money to pay it?

Of course there is that option Alex. In fact it is mandatory for poor people who can't scrape together even 20% as a down payment. Personally,I would never do business with anyone who could not put at least 20% of their own money on the table.

[AlexLah]

That's why they called it (These insurances on the bets) CDS LB, to avoid state control, they found a loophole and benefited from it.

Just ask yourself if I can buy some kind of insurance to protect me against the losses I make when playing in a casino.

I cannot, but hey those big money speculators can and when they loose it is all (sort of) covered it seems.

Why is there no option for people that buy a house to insure them that the mortgage gets payed in case they do not have the means/money to pay it?

Of course there is that option Alex. In fact it is mandatory for poor people who can't scrape together even 20% as a down payment. Personally,I would never do business with anyone who could not put at least 20% of their own money on the table.

Then please show me that option.

If there were these options, people would not default as it would be covered by their insurance.

Please show.

[lannarebirth]

That's why they called it (These insurances on the bets) CDS LB, to avoid state control, they found a loophole and benefited from it.

Just ask yourself if I can buy some kind of insurance to protect me against the losses I make when playing in a casino.

I cannot, but hey those big money speculators can and when they loose it is all (sort of) covered it seems.

Why is there no option for people that buy a house to insure them that the mortgage gets payed in case they do not have the means/money to pay it?

Of course there is that option Alex. In fact it is mandatory for poor people who can't scrape together even 20% as a down payment. Personally,I would never do business with anyone who could not put at least 20% of their own money on the table.

Then please show me that option.

If there were these options, people would not default as it would be covered by their insurance.

Please show.

Sure, here it is:

http://en.wikipedia.org/wiki/Lenders_mortgage_insurance

[AlexLah]

So if there was this kind of insurance, why did the insurance company blew up?

[lannarebirth]

So if there was this kind of insurance, why did the insurance company blew up?

I haven't watched any business type news for a decade Alex, but my recollection is, they tend to focus on revenues and sometimes earnings, although never ACTUAL earnings. They seldom focus on liabilities. Anyhow, I'm sure you know most insurance companies can't pay even a tiny fraction of the liabilities they are exposed to. Consequently they fail. That's why there are corporations; to limit liabilities.

[Abrak]

So we can't really assume any ''rational actors''

Well there is no need to assume rationality 'across societies' when there is no inherent 'rationality' within societies. At its simplest, this might be called 'moral hazard'. For instance, in broking a 'market maker' might inherently take excessive risk to make US$30m for a very large bonus, knowing his downside is that he would lose his job.

I suppose your last line in your post could be analogous to some ideas in chaos theory.

Chaos theory tends to have to diametrically opposite end causes - namely the 'butterfly effect' and 'random walk'. As both end results are impossible to predict 'assuming rationality' they tend to get lumped together. They both however have the starting point of 'rational independent individuals'.

So I think the downfall of all classical economics is largely due to 'aggregation' - namely the sum of the individual parts does not equal the whole. That is why I like the 'evolution' comparison.

The really interesting stuff to me is the work that is done on the very basis that we are not 'independent' entities. Possibly quite the opposite. (A purely sexist example here.) But does say your girlfriend when she buys a dress say 'I really like this' or 'I really think that other people will think I look good in this.' Or do you buy something because it is cheap or because you believe that the price will go up because other people will see it is as cheap.

Now this problem of non-independency is central to Marx, Hagel, Popper and according to this thread a theory by Soros that he calls 'reflexivity'!!

'Chaos' almost by definition involves insolvable equations. Co-dependence, the basis for 'behavioral economics' is mathematically incredibly difficult because of non-linearity. Conceptually it is very easy to grasp because all you really need do is to work backwards.Start at the end and work backwards.

Anyways, at one end you have the Austrians who believe in Rothbard's 'Robinson Crusoe' economics (his name not mine) as to how choices are made on the basis of noone else being around and then aggregated. At the other side you have Marx to a large degree who looked at the end result of aggregation and ultimately looked at extinction (well dialectics before extinction.)

Still I really like the 'evolution' comparison. We are all individuals pursuing our own individual goals of survival and reproduction. The end result of aggregation is not always good for the community as a whole. The 'peacocks' feathers were hardly based on a 'referendum'. But neither is 'co-dependent' thought. In fact if peacocks thought very much about anything they would think that great big feathers look really good in other peoples eyes although I cant really run, I cant fly but at least I get a decent shag. And the chick thinks well it is pretty cool he has the great big feathers (it is a bit like a Gucci hand bag), my parents will be impressed, I am impressed and my kids will also have incredibly nice feathers so everyone will be impressed. He is pretty fit isnt he?

Now the 'nice feathers' get a good 'shag' is half the equation. On the other hand, cant fly, bling overdose, can hardly walk, so in the long run you are totally screwed is just the other half.

(Incidentally I am not trying to give peacocks thoughts here just explaining why if they they had any, they would still act as complete morons. And to explain why the likes of Marx would say, well in the end, they they will be extinct.)

[Naam]

Here's the truth ofthe matter though. All of us have a choice. We can "opt in" to the system with all the deceit and profits/lossses that may bring, or we can opt out. I''ve got a foot in both camps and know I'm probably going to lose on one of my bets.

= the logical way to proceed even though losing some of the bets cannot be avoided.

[midas]

here we go.....maybe we will soon find out if the " cure " is worse than the disease

RBS tells clients to prepare for "monster" money printing by the Federal Reserve

There is no doubt that the Fed has the tools to stop this. "Sufficient injections of money will ultimately always reverse a deflation," said Bernanke. The question is whether he can muster support for such action in the face of massive popular disgust, a Republican Fronde in Congress, and resistance from the liquidationsists at the Kansas, Philadelphia, and Richmond Feds. If he cannot, we are in grave trouble.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html

Edited June 28, 2010 by midas

[midas]

I think in reality you're romanticizing the old times a bit midas, there was and always will be plenty of back-stabbing going around.... we have thousands of years of (un)civilization to prove that.

That's the way the world works, and it has been this way for millenia. And I suspect it will be this way for millenia to come, regardless of how many skies will have fallen along the way.

Oh yes I admit I do that but not because of the reasons you describe.

The world feels so different now - a distinctly rancorous atmosphere compared to the

1960's. You can sense and feel the less tolerant side of people now I never saw earlier in my life.

But then in 1960 there were only three billion people on this fragile planet

- now we have nearly 7 billion and to be 10 billion in 2061.

The way the 7 billion are behaving I would bet you anything the world

will not survive " for millenia to come " unless there is a profound change

of attitude and your response gives little hope of that. And also I wont be around to collect

my winnings

I agree midas - perhaps more than you think.

High populations and intolerance will create crises larger than any one particular financial crisis. Nature does not reward stupidity (and I mean that not in a 2012 kind of way, but in the long run). It may seem the case in the short run, but nature is unstoppable in the long run... My point to you is that perhaps one should just take some time to chill out in the meantime (please don't respond with "but some people don't have the opportunity to chill out, jcon" - I know that).

" just take some time to chill out in the meantime "

I cant even do that this year - no water in the ricefields

I cant see how Thailand can achieve the 6% growth predicted for this year with this going on,